Martin Midstream Partners LP (MMLP) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Martin Midstream Fourth Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to turn the conference over to Bob Bondurant, Chief Financial Officer. Please go ahead.

Thank you, Sabrina. And let everyone know, on the call today, we have Ruben Martin, our CEO; Joe McCreery, Vice President of Finance and Head of Investor Relations; and Wes Martin, Vice President of Corporate Development.

Before we get started with the financial and operational results for the fourth quarter, I need to make this disclaimer. Certain statements made during this conference call may be forward-looking statements relating to financial forecast, future performance and our ability to make distributions to unitholders.

We report our financial results in accordance with Generally Accepted Accounting Principles and use certain non-GAAP financial measures within the meanings of the SEC Reg G such as distributable cash flow or DCF and earnings before interest, taxes, depreciation, and amortization or EBITDA and we also discuss adjusted EBITDA. We use these measures because we believe it provides users of our financial information with meaningful comparisons between current results and prior reported results and it can be a meaningful measure on the Partnership's cash available to pay distributions.

We also included in our press release issued yesterday a reconciliation of EBITDA, adjusted EBITDA and distributable cash flow to the most comparable GAAP financial measure. Our earnings press release is available at our website, martinmidstream.com. Also we plan to file our 10-K after the market closes on February 29.

Now I'd like to discuss our fourth quarter 2015 performance compared to the third quarter and also discuss our performance for the year. For the fourth quarter, we had adjusted EBITDA of $51.4 million compared to $41.4 million in the third quarter and for the year of 2015, we had adjusted EBITDA of $188.3 million compared to $149 million in 2014.

Our distributable cash flow for the fourth quarter was $35.8 million, creating a distribution coverage of 1.07 times. For the year of 2015, our distributable cash flow was $133.9 million, creating a distribution coverage of one times. These distributions include incentive distribution right payments of $3.9 million in the fourth quarter and $15.4 million for the year.

We believe these financial results demonstrate our ability to weather the storm that has been created in the MLP space from continued erosion in energy prices throughout 2015 and into 2016. We understand the market sell-off of energy names that are heavily dependent on wellhead volumes to sustain their cash flow. We realized the headwinds these companies are facing in terms of their forecasted cash flow supporting their current distribution.

However, we are not so dependent on the wellhead. The majority of our business lines generate their cash flow from activities around numerous oil refineries. As I like to say, as long as Americans continue to drive cars, refineries are going to continue to run and make gasoline and other refined products, whether crude is $100 a barrel or the crude is $30 a barrel. One might also agree if gasoline prices remain depressed, refinery activity may even increase, which could also benefit our business.

Now, of course, we're not completely insulated from the fall in commodity prices. The areas where we are directly exposed to crude oil and also NGL production volumes [are at] our Corpus Christi Crude Terminal and in our 20% own investment in WT LPG. We have somewhat protected our Corpus Christi Crude Terminal by our minimum throughput contract with an investment-grade counterparty.

And WT LPG has limited minimum volume commitments, and despite increasing its tariff rates in 2015, the resulting rates still remain among the lowest of all pipelines flowing from the Permian to the Mont Belvieu market. This rate structure helps to minimize our NGL throughput volume risk and we continue to see NGL volumes staying fairly consistent in the WT LPG system.

We also have indirect exposure to crude production in our shore-based terminals. These terminals are exposed to Gulf of Mexico drilling and production risk, but substantially all of this cash flow is protected by a minimum diesel throughput volume contract with our general partner MRMC. This business has been earning its cash flow at the minimum throughput volume level for the most recent years. So, cash flow from our shore-based terminal business should remain consistent in 2016.

Now I would like to discuss our fourth quarter performance compared to the third quarter. In our Natural Gas Services segment, our fourth quarter EBITDA was $24.9 million compared to third quarter EBITDA of $14 million. The cash flow from our NGL Logistics business was $13.9 million compared to $2.8 million in the third quarter.

This seasonal increase in cash flow from our margin-based NGL Logistics business primarily came from our refinery grade butane logistics activities. Crude oil refineries demand butane from October through March due to an easing of vapor pressure regulations, and as a supplier to these refiners, we realize greater sales and margins during this period compared to the April through September timeframe.

This business also benefited from our new rail terminal at our underground NGL storage facility in North Louisiana, which was placed into service in June of 2015. This new rail terminal allowed us to reach a more geographically diverse refinery footprint this winter compared to previous years.

The balance of our Natural Gas Services cash flow was from Cardinal Gas Storage, which realized $11 million in the fourth quarter compared to $11.2 million in the third quarter. Cardinal Gas continues to operate as a fee-based firm contracted natural gas storage business with a weighted average contract life of 4.5 years.

Now, in addition to the cash flow generated in our Natural Gas Services segment, we realized $3.4 million distribution from our West Texas LPG Pipeline joint venture in both the third and fourth quarters of 2015. WT LPG throughput for the fourth quarter was down slightly from the third quarter driven primarily by (inaudible) late in the quarter.

Now, for the year, our EBITDA for the Natural Gas Services business was $73 million compared to $43.7 million for 2014. This cash flow increase was primarily due to owning a 100% of Cardinal Gas Storage for the full year in 2015 compared to four months in 2014. Additionally, we received $11.2 million of distributions from WT LPG during 2015.

Now looking to 2016, we believe our NGL margin business will benefit from having our Arcadia rail facility operational for the full year compared to only seven months in 2015. We will also benefit from having higher tariff rates at WT LPG for the full year compared to only six months in 2015.

Offsetting these forecasted cash flow increases will be a reduction in cash flow from Cardinal Gas Storage as [6 Bcf] storage contracts at Arcadia will rollover in mid-2016 at lower contracted rates than existed in 2015. As a result, when netting these positive and negative forecast impacts, we are forecasting a slight decline in overall cash flow in Natural Gas Services in 2016 when compared to 2015.

In our Terminalling segment, our fourth quarter EBITDA was $15.3 million compared to $18.4 million in the third quarter. The decline in cash flow was primarily due to 20% decline in crude volumes at our Corpus Christi Crude Terminal and increase in our operating expenses at our naphthenic lubricant refinery. We also experienced a fourth quarter seasonal decline in our package lubricant volumes sold, negatively impacting our fourth quarter package lubricant cash flow by $0.6 million when compared to the third quarter.

Also in our Terminalling segment in the fourth quarter, we took a non-cash impairment charge of $9.3 million related to an investment in our previously disclosed condensate splitter project. With the recently approved federal regulations which now allow for crude oil exports, we believe this project is no longer economically viable. As a result, we have fully written off this investment. However, with the federal ban lifted on crude oil exports, we believe our Corpus Christi Crude Terminal assets could play a meaningful future role in crude oil exportation out of the Corpus area.

Full year cash flow from our Terminalling segment was $67.3 million compared to $64.3 million in 2014. Our shore-based terminals, legacy specialty terminals, our refinery and our packaged lubricant business all had a combined increased cash flow of $7.5 million relative to 2014. This was partially offset by $4.5 million reduction in cash flow from our Corpus Christi Crude Terminal as a result of lower throughput volumes and lower overall rates as a result of cumulative volume thresholds being met in early 2014.

Looking toward 2016, in spite of anticipated reduced crude oil throughput at our Corpus Christi Crude Terminal, we are anticipating an increase in cash flow from our Terminalling segment. We are anticipating increased cash flow from our naphthenic lubricant refinery as you recover our recently invested growth capital through rate increases effective January 1 of 2016.

We also anticipate increased cash flow in our packaged lubricant business through improved margins. Basically for the last 15 months, we have experienced margin compression in this business as sale prices have been continually falling faster than we could turn our higher cost packaged inventory. With anticipated packaged lubricant price stabilization, we should have improved margins as we now have liquidated our higher cost inventory.

Moving to our Sulfur Services segment, our EBITDA was $8.6 million in the fourth quarter compared to $5.7 million in the third quarter of 2015. Our fertilizer EBITDA was $3.5 million in the fourth quarter compared to $2.3 million in the third quarter. As we have disclosed previously, the third quarter is always the weakest in our fertilizer business. It is harvesting season for the US farmer.

During the fourth quarter, our fertilizer volumes were actually down 12% from the third quarter, as farmers had not really begun their winter field programs. However, our fourth quarter fertilizer margins improved by $34 per ton when compared to the third quarter as our mix of products sold migrated toward higher margin products.

On the refinery by-product sulfur side of the business, our fourth quarter EBITDA was $5.1 million compared to $3.4 million in the third quarter. This cash flow improvement was a result of [9%] increase in volume sold and 36% increase in overall sulfur margins. For the year, our sulfur services EBITDA was $35.9 million compared to $33.8 million in 2014.

Looking forward to 2016, we believe our fertilizer group should benefit from lower feedstock costs allowing for some margin improvement. Also the US corn acreage to be planted is forecasted to be 2% to 3% greater than 2015. Offsetting this will be a slight decline in the refinery by-product sulfur side of the business as we have a scheduled first quarter dry-docking of our ocean-going sulfur tug/barge unit. This offshore marine tow transports molten sulfur from our Beaumont terminal to Tampa Florida.

Now at our Marine Transportation segment, we had EBITDA of $4.1 million in the fourth quarter compared to $3.7 million in the third quarter. The increase in cash flow from the quarter was from the inland transportation side of our business as we benefited from reduced maintenance costs when compared to the third quarter. The offshore transportation business cash flow was flat quarter-over-quarter.

Also during the fourth quarter, we analyzed our marine vessels for impairment and identified four inland vessels that required $1.3 million non-cash impairment charge in the fourth quarter. On an annual basis, cash flow for both 2015 and 2014 in our Marine Transportation segment was $18 million.

Now looking toward 2016, we will have one offshore tow working under a term contract with our general partner and we'll have two offshore tows available in the spot market. On the inland side of the business, we are forecasting less term tows and more spot tows in 2016 compared to 2015. As a result, we believe our overall Marine Transportation cash flow will be slightly less in 2016 when compared to 2015.

Our partnerships unallocated SG&A costs exclusive of non-cash unit compensation expense was $4.3 million in the fourth quarter compared to $4.6 million in third quarter of 2015 and for the year, was $17.5 million compared to $17.9 million in 2014. Now looking toward 2016, the overhead charge from our general partner will decrease by $650,000 and as a result, we anticipate unallocated SG&A to be less in 2016 when compared to 2015.

We continue to hold $15 million note receivable due from Martin Energy Trading, an affiliate of our general partner. This investment generated $2.3 million of interest income in 2015 and should continue in 2016. This interest income is included as EBITDA for calculating our bank leverage covenants.

Our maintenance capital expenditures and turnaround costs for the fourth quarter were $5.4 million and $14.8 million for the year. For 2016, depending on project timing, we should have a total of $15 million to $20 million of capitalized maintenance and turnaround cost.

So, to summarize, we are very pleased with our financial and operating performance despite the equity value destruction which has occurred in the MLP space in 2015 and has carried over into 2016. Overall, we outperformed our guidance forecast for the year, which we provided to the market last March. On a segment basis, our Natural Gas Services and our Sulfur Services segment outperformed our guidance while our Terminalling and Storage and our Marine Transportation segments underperformed our guidance.

Obviously, while we wish all segments would outperform guidance, we believe the diversity of having four business segments is a strength for our company and helps protect the overall forecasted cash flow of our company. We believe this cash flow diversity along with the generally refinery-centric nature of our business model and strong support from our general partner, Martin Resource Management, possibly differentiates us from significant majority of other MLPs and helps us remain committed to our current distribution rate.

Now, I'd like to turn the call over to Joe McCreery who will speak on our balance sheet, our counterparty risk, the financial position of MRMC and our financial results compared to our 2015 guidance.

Thanks, Bob. I'll start with a normal walkthrough of the debt components of our balance sheet and the bank ratios, then discuss counterparty risk, and in particular, provide an increased level of transparency into the operations and financial conditions of MRMC, and finally, I'll provide some full-year benchmarks against the guidance cash flow we provided in early 2015.

On December 31, 2015, the Partnership's balance sheet reflected total long-term funded debt of approximately $865 million. This balance sheet funded debt level is before unamortized debt issuance and unamortized issuance premiums as actual funded debt outstanding was $872 million.

Reconciling this year-end amount, our revolving credit facility balance was $498 million and the notional amount of our senior unsecured notes was $374 million. Thus, the Partnership's total available liquidity under our revolving credit facility on December 31 was $202 million based on our $700 million revolving credit facility.

For the year end 2015, our bank compliant leverage ratios defined as senior secured indebtedness to adjusted EBITDA and total indebtedness to adjusted EBITDA were 2.62 times and 4.59 times, respectively. This represents total leverage improvement of 26 basis points compared to the third quarter ratio and further represents our best year in total leverage position since 2012.

At year-end, we're pleased with the de-levering we have demonstrated. Coupled with the solid financial performance of the fourth quarter, we are moving closer toward our long-standing publicly disclosed target leverage of 4.5 times. Our bank compliant interest coverage ratio as defined by adjusted EBITDA to consolidated interest expense was 4.69 times.

Looking at the balance sheet, total debt to total capitalization at December 31 was 68.7%. Our funded debt decreased during the quarter as we experienced the anticipated working capital reduction of approximately $17 million associated primarily with the seasonal sale of inventory of butane within our Natural Gas Services segment.

We know here also that as bunding season continues today, we expect further working capital reductions in the first quarter as our butane inventory is depleted. In all, at year-end December 31, 2015, the Partnership was in full compliance with all banking covenants, financial or otherwise.

Staying on the debt side of the balance sheet, during the fourth quarter, we successfully completed the liability management program, which we commenced earlier in 2015. To that end, the Partnership purchased and retired approximately $9 million of additional senior unsecured notes due 2021 during the fourth quarter.

In all, during 2015, we repurchased and retired approximately $26.2 million of our notes in the open market in an effort to reduce our interest expense and lower our cost of capital. You'll find $1.2 million gain we recognized by buying our notes at a discount on our income statement in other income.

At this point, the pre-negotiated basket with our senior lenders allowing us to make such open market purchase is fully utilized. We do believe, however, given the current capital markets disruption, that significant value can be created by repurchasing our publicly traded securities at a discount. Therefore, it is possible that we seek the approval from our lenders to make additional open market purchases of our bonds and our equity units in the future.

At this point, we normally discuss the Partnership's capital raises. However, during the fourth quarter, MMLP did not raise debt or equity capital. Looking to 2016, we do not anticipate a need to raise external capital. As mentioned in last night's press release, our growth capital expenditures for [2016] are expected to be less than $30 million.

Additionally, we expect maintenance capital requirements to be in line with previous years and less than $20 million. We plan to utilize our revolving credit facility for our growth capital funding needs during 2016.

Now, let me discuss MMLP's counterparties, as counterparty risk has become increasingly important topic in our industry. Many are aware that major integrated oil companies and large independent refiners are the cornerstone of our customer base and [compromise] a substantial portion of our revenue.

Looking at 2015, high-quality investment-grade counterparties accounted for approximately 52% of our revenue. In addition to our investment-grade counterparties, MRMC affiliated entities accounted for another 14% of our revenue. So, from a combination of investment-grade counterparties and MRMC entities, we generated approximately two-thirds of our revenue last year.

We further estimate that between 20% to 25% of our EBITDA comes directly or indirectly from related party transactions with MRMC. MRMC, for example, is a key customer of the Partnership at our Smackover refinery, our shore-based terminals and with our Marine Transportation segment, just to name a few instances.

As the ratio of revenue to cash flow suggests, MRMC is also a higher margin producing customer of the Partnership on a comparative basis. Most of the contracts between MRMC and MMLP are long-term or even perpetual in nature. And while you may ask, is that a good thing or does the relationship between MMLP and MRMC represent a risk to MMLP's cash flow stability, we believe that MMLP's contracts within MRMC are some of the most viable, long-term and economically sound contracts we have.

That said, perhaps now is an appropriate time to provide a greater level of transparency as to MRMC's business model and its financial metrics. For those who don't know, MRMC is a leading independent provider of logistics solutions, storage, marketing and distribution of petroleum products, by-products and chemicals to refineries and other energy concerns as well as the petrochemical industry.

And of course, MRMC is a majority owner of the general partner of MMLP. MRMC is fully owned by its employees under an ESOP and accordingly has a tax-advantaged status of being an S Corp. It also owns approximately 6.3 million limited partnership units of MMLP, roughly 18% of the total outstanding. As the general partner of [MRMC], MRMC also takes unit ownership in its ongoing distributions from the LP units it owns seriously.

MRMC is closely aligned with its public unitholders and remains committed to the MLP structure. Further, it remains committed to maintaining its distribution in a manner that best serves both public unitholders and MRMC's ESOP participants. Distributions from MMLP further play an integral role in supporting a capital structure and prosperity MRMC enjoys.

One of the key investment considerations of MMLP is the absence of direct commodity exposure. When created in 2002, that was exactly the idea. MRMC would retain the commodity and working capital requirements of the business while MMLP would own the physical assets and benefit from the stability of cash flows they produce. Generally speaking, that same model exist today. MRMC continues to move, handle and store many of same commodities utilizing the physical assets of MMLP.

In 2015, MRMC had solid financial performance. Its cash flow is near record levels at a time when the working capital requirements necessary to run the businesses and the cost of petroleum-based products fell. This situation allowed for expanding margins in many cases and improved profitability.

On that basis, MRMC's strong financial performance drove its senior leverage down significantly. At year-end 2015, MRMC enjoyed its lowest bank leverage profile since inception of its current capital structure six years ago. Senior leverage at MRMC was approximately 2.3 times debt-to-EBITDA and its fixed charge coverage ratio was a robust 2.5 times at year-end.

To be clear, MMLP benefits when MRMC is financially strong. A growth project such as our South Texas asphalt terminal was recently approved to be developed at the MRMC level. In times when traditional forms of capital typically available to MLPs are disrupted or even close altogether as we're seeing now, MRMC can be of assistance.

Accordingly, MRMC can act as an incubator and develop such a project removing MMLP's dependency on the capital markets for funding. Ultimately, that asset will likely find its way back to MMLP in the form of a drop down when the Partnership's cost of capital has recovered to normalized levels.

Further, MRMC's ability to support the limited partners distribution is enhanced when MRMC is having financial success. We note that MRMC has in the past forgone the incentive distribution rights it would have otherwise been entitled to receive. MRMC is a supportive general partner of MMLP. It always has been and will continue to be so, going forward.

At times such as these, it's hard not to acknowledge the diverse nature of MMLP's operations and cash flows. Our predominantly fee-based model provides relative clarity as to how we expect to perform period-to-period, quarter-to-quarter.

As we already conveyed during our September 30 quarter-end earnings call, we stood behind and reaffirmed our full year 2015 cash flow guidance. We were pleased to achieve and exceed this guidance levels for 2015 by approximately 1% [on] adjusted EBITDA before SG&A of $204.7 million compared to guidance of $202.7 million.

By segment, although with less detail than Bob conveyed, I will now reconcile our actual performance to the guidance provided during the first quarter 2015. As predicted, the Natural Gas Services segment became our largest cash flow contributor at $83.5 million. This compares favorably to our asset guidance level of $81.1 million. Better than forecasted results at Cardinal and tariff increases at West Texas LPG helped achieve these solid results.

Next, Terminalling and Storage contributed $67.3 million. This fell short of our planned level of $72.3 million. As Bob mentioned, this shortfall is primarily attributed to a weaker Martin Lubricants division and declining throughput at the Corpus Christi Crude Terminal.

Our Sulfur Services segment provided the largest payroll variance to plan, generating $36 million for the year compared to our guidance of $27.4 million. Better-than-anticipated margins across our platform in both the pure sulfur and fertilizer divisions more than offset a slight decrease in tonnage handled for the year. As we witnessed in 2015, our sulfur businesses have a level of countercyclical nature and ability to perform well when crude oil and related commodity prices are lower.

And finally, Marine Transportation missed our guided level of $22.2 million, generating $17.9 million of cash flow after Marine only SG&A of $5.7 million in 2015. Marine struggled with higher than anticipated repair and maintenance cost on the inland side of the business and the negative impact of having two offshore assets not fully contracted during the year.

For your benefit, we posted to our website a comparative illustration of the 2015 adjusted EBITDA before SG&A by segment, by asset, compared to our original March 15 guidance levels. Using the very same format, we will announce and post our full year 2016 cash flow guidance to our website before the market opens on the morning of March 23.

Sabrina, this concludes our prepared remarks this morning. We would now like to open the lines for Q&A.

(Operator Instructions) Charles Marshall, Capital One.

A quick question on the Corpus Christi Crude Terminal. Recognizing that you said volumes are likely to come down here in 2016 relative to 2015, understanding you have I think 85,000 barrels per day MBC with Shell, can you kind of just talk about that contract a little more and the volumes you're expecting in 2016? Do you expect to get volumes at MVC level of 85 or even below, and if so, will you receive deficiency payments? And, I guess, just a quick follow-up to that, can you talk about the tenure of that contract and how long that goes into?

I'll speak to the tenure. The tenure goes through November of 2017. Our rates are, I believe, in the fourth quarter, were 119,000 barrels if I'm -- memory right. It is running a little bit below that. It is running above the 85,000. Currently, it's running about 95,000 to 100,000 barrels a day. So, our instincts are its going to sell at that rate as far as volume is going. Now, remember, the incremental decline is at a much less rate. Unfortunately, I can't disclose what that rate is, on a per-barrel basis, but it is at lower level. So, yes, we are giving up volume, we are giving up cash flow, but on a relative basis, the first 85,000 barrels are much higher priced than what the net barrels are above 85,000.

Got it. And then I guess, switching over and I appreciate all your color on the counterparties you provided in your opening comments, but with regard to sort of the one-third that you didn't kind of highlight, is it safe to assume that, that revenues are from non-investment grade entities, and if that's a safe assumption, can you kind of talk about some of the backstops that you may have in terms of letters of credit, et cetera, that you may have more comfort in that remaining one-third?

Sure. So, if you think about our revenue account, it's interesting. It kind of falls into two buckets really. Our customers are really a service customer or a commodity customer and of course the commodity customers are in the NGL business typically. And you think about that, our largest customer, in fact, of the entire partnership is a non-investment grade entity that is on the natural gas liquid side.

And so, although they're non-investment grade, they have been with us for decades at this point in time given the relationship with MRMC and then ultimately MMLP. So, we don't think there's any risk there. We certainly know their business well and in fact, we have spent some additional capital at the Partnership in 2015 to appease them and continue our relationship with them on a go-forward basis.

So, if you take them out and then they are about 12% of our entire revenue base, being the largest, you're talking a very small percentage now, 12 to 13 percentage that's left that our customers that we've serviced for a number of years again with respect to the liquids business or on the refinery side, it could be in the lubricants customers as well. So, they're typically margin-based customers in that regard, but I don't think we have any issue with any of them at this point.

[I'm not] going to comment on those lubricant customers and those propane type retail customers, it's a very diverse group, it's very low exposure to each and every one. So, just want to throw that comment out.

The final comment I'd make is the numbers that Joe is throwing out were revenue numbers and I think when you look at really on a true cash flow basis, just given the fact that we are, as Joe has mentioned on some of these, like on our butanes, the revenues numbers sometimes get a little bit inflated. So if you look that at really more on a cash flow basis and try to isolate the sort of investment-grade percentage in the MRMC piece of cash flow, how much of that of our total cash flow is attributable to those two, it's higher than the two-thirds percentage. So, revenues is a number that we can go out and explicitly identify to Joe's point, but, I think on a cash flow basis, it's actually a higher percentage of investment-grade and MRMC related cash flow.

Got it. That makes sense. Appreciate it. And then just one last one for me and I'll hop in the queue. I know you referenced about 6 Bcf rolling off at Arcadia. Sort of a two-part question here. In your model, are you assuming that all 6 Bcf get re-contracted at lower than historical rates?

Yes, we are. The way that we looked at that is and we have actually already re-contracted those and we did that back in the fourth quarter of last year. So those are re-contracted. I think when you look across our whole universe of contracts on the gas storage side, I think we're at something about 3.5 years or 4 years, 4 plus years on a weighted average basis. So when we are re-contracting those, yes, the rates are coming down, but we're still -- our business model is still to enter into longer-term contracts with respect to those assets.

Got it. And then just really quickly, with respect Monroe, how much is rolling off this year? Is that under certain stress from contract (inaudible)?

The interesting thing about Monroe is it's been versus when we originally did that deal back in 2011, where some of the rates there were higher, all those contracts have since rolled off. So, on a market basis, they're really pretty much rolling over at flat rates. We have been rolling those over either -- they're typically one to two year type contracts at that facility.

So where we are today is those contracts have been rolled over going into sort of April 1 new storage year, if you will. So, I think the 94% plus capacity contracted there, so I don't see any really exposure specific to that facility on a year-over-year basis. And in fact, some of the interruptible that we've had at that facility continues to be positive in that effect. So, Monroe is actually on a year-over-year basis looking flat to even better for 2016.

Got it. That's it from me, guys. Thanks again. And congrats on a good quarter.

(Operator Instructions) T.J. Schultz, RBC Capital Markets.

Just a couple of different ways to think about debt leverage, if you can give me your expectations for where you expect leverage by the end of 2016 and then, as we think about that, are there any asset sales that are being considered this year, and then, I guess, a third part of that is, if you get some the allowances you may be seeking, what are your expectations or preferences to buyback debt or buyback units this year?

So with respect to the balance sheet, you did see the improvement that we anticipated for the year-end 2015 number, and we also mentioned sort of the capital requirements for 2016 being on the growth side, plus or minus $30 million. So from that perspective, given the fact that we don't have a capital markets dependency in 2016, we will in fact use revolving credit facility. The net of all that is fast forward to year end 2016 and we see leverage back in kind of the 4.6 times to 4.7 times range. So slight leverage creep kind of based on our cash prediction for 2016.

I'll pass to Wes, and he can address the potential divestiture question.

Yes, I think, without getting into any specific, I think just to be clear, there is no mandate from the Board or management at this point in time to go sell assets. I think, just a general answer to your question, we'd be opportunistic on that front. I think given our sort of stated target leverage of 4.5 times, clearly, we would like to get to that level. And as Joe just mentioned, the sort of target of 4.6 times, 4.7 times by the end of the year potentially, so that slight leverage creep.

So, we would entertain the concept of some asset sales, but given where we are looking for 2016, there's no mandate or no immediate need from our perspective to do that. But if the right opportunity comes along at an appropriate valuation, sure we would consider that.

The open market purchases of our securities, I think, as we think about it, we're hearing now that our bonds are trading in terms of mid '80s. As disappointing as that sounds, I think on a relative basis that may imply some strength in the credit markets. But nonetheless, there's huge value there as you can see from our ability to go buy those bonds, pickup plus or minus 400 basis points of interest expense before we get to the actual discount, which we would include in our income.

But, nonetheless, from where we are today and where we stand, the basket is full as I mentioned and we would need lender approval to do that. If we were successful in that, I think you could probably envision maybe another $25 million, something like that on the debt side.

Interestingly enough, the unit purchase trigger is leverage governed. So to satisfy that, leverage would have to go below 4.25 times. So then the linkage of your two questions I think is in play with respect to, if we were successful on some divestiture although not planned at this point in time, then perhaps leverage would fall to an appropriate level where we could, in fact, go and buy our units in the open market. So leverage linked on the equity side and then debt is full for now, but we would seek lender approval perhaps in the near future.

Okay, great. That's all very helpful. I guess, just last question, you spent quite a bit of time on MRMC. Obviously, they've been supportive in the past. Just curious if there is levers that you may be seeking to pull there to help the MLP during this cycle, whether it's IDR waivers or whatever?

And the answer is that we're evaluating each one of those, that situation as we go along. We do have -- we are willing to give IDRs for if it's necessary to maintain the strength of the unit. So we're evaluating as we go along, but MRMC can pull that trigger at any time that it wants to.

I mentioned with respect to an asset development project, the asphalt terminal, that has been approved MRMC and so, from that perspective, MRMC is supportive in developing an asset that ultimately should find its way back to the Partnership when cost of capital is restored.

Thank you. And I'm showing no further questions at this time. I would now like to turn the conference over to Ruben Martin, CEO, for closing remarks.

We want to thank everybody for the calling in today. And we did have a good strong fourth quarter performance, and felt like our full year results were very good at one times coverage. And so capital requirements for 2016 are very, very modest and no capital markets issuance for 2016 is expected, and we have a strong support of MMLP. I don't think we can overemphasize the MRMC support that we're willing to give for long-term contracts, asset development and IDR support if we need to. So we've had got a good start to 2016 and we expect similar cash flows compared to 2015. So, at MMLP, all is good. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.